Meteorex Will Need More Funding This Year

Diversified miner Metorex will need more funding later this year and is considering options including corporate transactions and turning assets into cash, its chief financial officer, Maritz Smith, said yesterday.

Metorex said late last year it would have to restructure about R2bn of debt and raise about R1bn in fresh capital because of cost overruns and delays on its Ruashi copper project in the Democratic Republic of Congo. In December, it raised R920m through a share placement, clawback offer and bank financing, and made a number of management changes including bringing more nonexecutive directors on to the board.

In the six months to December, the group's revenue rose 21% to R1,2bn compared with the same period in 2007, mainly reflecting a weaker rand, but cash mining profit fell 27% to R276m because of a sharp rise in operating costs. Headline earnings dropped 11% to 48,21c a share. By year-end the debt:equity ratio had risen to 40% from 30% and the number of shares in issue after the refinancing had risen to 740-million from an average of 379-million.

Imara SP Reid analyst Steve Meintjes said the results were no surprise after the company's debt-raising late last year. In the next six months, new management would be "severely tested".

Metorex MD Charles Needham said the group's core operations -- Ruashi, Chibuluma, 55%-held Pan African and Vergenoegd -- performed well in the past six months.

The first phase of Ruashi-Sable, which is winding down in preparation for phase two, posted a 77% decline in mining profit at R14,6m. At phase 2 of Ruashi, $300m has been spent and another $35m will be spent in the current six months, bringing total project costs to $335m from an original budget of $180m. The main cost overruns have been in design changes, higher costs for steel and cement, and the need for increased social investment in the Congo.

Ruashi 2 produced 2 215 tons of copper cathode between November and January and has now commissioned its cobalt plant.

Management's main focus is to ramp up to full production of 45000 tons of copper and 3500 tons of cobalt by December. Smith said Ruashi needed a copper price of $3900/ton to break even, including debt servicing costs.

It has hedged 70% of its copper production at $7071/ton to June and 50% at $3900/ton from June this year to June 2012.

Needham said the Chibuluma copper mine in Zambia boosted copper production 14% but mining profit fell 76% because of the lower copper price.

The mine was operating efficiently and costs would benefit from the depreciation of the kwacha against the dollar.

Gold miner Pan African grew mining profit 148% to R159,9m, benefiting from the gold price and exchange rate, while fluorspar miner Vergenoegd grew profits 90% to R69,2m, as it reduced volumes to focus on quality.

Although fluorspar prices had held up, they were starting to weaken, Needham said.

Source: AllAfrica.com